For tech-savvy buyers, real estate agents go to the video

Occasionally, when real estate agent James Lisowski is at an open house, someone will approach him and say: “You’re the guy on the video!”Started about a year ago as a way to stand out, Lisowski’s online video home tours have garnered him and his fellow agents a small following and become an important tool in their marketing strategy: targeting tech-savvy buyers who increasingly are conducting much of their search through their mobile devices.

“A big piece of the puzzle . . . is loss aversion,” Humphries said. “In January, 27 percent of sales in the D.C. metro area were losses. Most sellers are loath to sell their home at a loss, and many are still anchored on the peak-level prices.”

“Essentially, the housing market has become like a game of musical chairs,” Humphries added. “People won’t get out of their seats because they’re afraid they won’t be able to find another seat to sit down in.”

As a result, sellers who aren’t underwater and want to list often are in a better bargaining position. In February, they were, on average, able to get 97.1 percent of their list price. The 10-year average for that month is 95.5 percent.

Even in a seller’s market, it’s not a given that anyone can simply put up a for-sale sign and expect a wave of offers pushing the property well above list price. Supply and demand — the biggest factors in determining sale prices — can vary dramatically from one neighborhood to another.

Still, with all things being equal, experts say, what can distinguish one house from another in popular neighborhoods are the right pricing strategy and buzz.

Pricing, listing strategies

For Rob and Debbie Seidner, getting ready has meant months of gradually clearing out the toy clutter of their 1-year-old daughter and 4-year-old son and caulking and touching up the paint on their Capitol Hill rowhouse, even though it was gutted and rebuilt two years ago.

“Our house really is move-in ready,” said Rob Seidner, expressing concern about the competition. “We do have a completely redesigned, brand-new house, but most of the ones on the market, you’d be the first ones living there.”

His real estate agent is tracking every listing and sale in the area, making sure that he knows the condition and details of each home, and staying attuned to the changing market. The Seidners have communicated three price points to their agent: the lowest they could possibly accept, the level at which they’d break even and the price at which they could move out immediately.

“We know what he thinks is a really great price, and if someone’s coming in and blowing that out of the water, it’s easy enough to put our things in storage,” said Seidner, 36, who works in human resources at the Transportation Department. The family aims to move to the suburbs, he says, so the children will have better school opportunities.

Whether to list slightly above market, exactly at the market or slightly below in hopes of attracting more interest and driving up the price are hot issues among real estate agents.

Jennifer Nangle, an agent based in the District with Re/Max Realty Services, says she prices homes about 1 percent below the market value in hopes of attracting multiple offers and moving higher.

But Traci Levine, an agent with Long and Foster in Potomac, said, “I’m pushing the envelope with my pricing.” Levine, noting that every listing since January has sold, added: “The good houses are going within a matter of hours to days. There’s just nothing on the market.”

Recently, she listed a Potomac house with an unfinished basement for $920,000 and received multiple offers, when the previous comparable sale from nearly three years ago was $880,000, with a finished basement.

The best day of the week to introduce a listing to the market is also a matter of debate. Redfin advised a Friday debut, to land on the top of a buyer’s mobile phone queue when he’s planning his weekend house shopping. Redfin’s historical data show that homes listed on Friday sell faster and closer to the asking price than on any other day of the week.

Other agents prefer to list on Wednesday or Thursday to leave more time to get prospective buyers’ attention.

But in terms of when the buying season will begin, agents and experts agreed that waiting until your flowers bloom may be too late. “We’re in the throes of the spring market now,” said Long and Foster’s Levine. “If you wait until late March or April, you’ll have more properties competing.”

“Let’s go ask him why,” says Di Ruggiero, a real estate agent who owns and serves as marketing director of GreenLine Real Estatein D.C., holding a microphone to the mouth of a statue of Lincoln. “No comment,” he says, then shifts the microphone to the mouth of a statue of Lincoln’s horse. “Let’s go talk to someone who actually lives here now and see what they think.”

Di Ruggiero says he strives for broadcast quality in his seven-minute videos, often employing humor to make them engaging. He says he wants to make house-hunting a fun experience for buyers, rather than drudgery in having to click through photos online.

When he began this marketing campaign in 2009, he said, he paid someone to produce the videos, adding that good ones can cost $5,000. Since then, he has purchased equipment, studied the art of video-making and now produces them himself.

He has produced about 30 videos on D.C. neighborhoods — what he calls mini-documentaries — and on individual properties. One video he produced shows people at an open house raving about a Columbia Heights condo.

He considers 1,500 page views to be a success.

“You can’t fudge with video. For people to give it any credence, they have to feel as though it has the same polish and feel as what they see on television,” he said. Familiarize yourself with “fast editing and fast cuts,” he urges other agents.

Videos are a growing segment of real estate marketing but are not yet widely used, experts say.

In a recent survey by the National Association of Realtors, 14 percent of sellers questioned said their agent used video to market their home, up from 9 percent in 2007. In that same survey, 45 percent of buyers questioned said they found video tours very useful.

“Over the last couple of years, we came from virtually no use of video,” says Paul Bishop, the association’s vice president for research. “Now sellers are looking for creative ways to market their homes. Video . . . is something I can use to really market my home over and above advertising, a mention in the paper, an open house or sign in my front yard. Technology is making it feasible to reach a broader audience.”

Finding the right buyer

Fulcrum Properties Group uses a full-time videographer to make video tours of every home the D.C. real estate firm lists, pointing out different features of the house.

The firm distributes links to the video to brokers, agents and interested buyers, as well as the homeowner’s networks, which with just-listed cards and in-person visits to neighbors will build buzz for the first open house. “That first weekend we’ll get 50 bodies through. It builds a little frenzy,” said Fulcrum’s Tom Kavanagh.

Once the offers start coming in, experts say, it is time to shift from creative thinking to critical thinking.

Remove emotions from the process and focus on your goal: a single, qualified buyer who can consummate the deal in your required time, within your price parameters. As appealing as the scenario of multiple offers and a bidding war seems, that may signal to your buyer’s lender that the home isn’t worth the purchase price — and the financing could fall through, costing you the sale.

“You want one person that’s well qualified, that has a wonderful lender and a great settlement attorney and is going to settle between 30 and 45 days,” said Kavanagh.

Be realistic. Ultimately, it doesn’t matter how hot the market is for other sellers, but for your specific circumstance.

“The market is great, but it matters how you present yourself in the market,” agent Bayat said. “The most important thing is, what is your goal, what do you want to achieve?”

KIRKLAND, WA, Mar 11, 2013 (MARKETWIRE via COMTEX) — Market Leader LEDR -0.46% , a leader in online marketing and technology solutions for real estate professionals, today released results of a nationwide survey highlighting a significantly more optimistic real estate community across several key market indicators, including real estate valuations, existing-home transactions, new construction starts and more. The survey involved more than 2,400 real estate professionals, all members of ActiveRain, the real estate industry’s largest social media network with more than 330,000 real estate professional members.

A similar survey in early 2012 correctly predicted the bottom of the US real estate market, as the National Association of REALTORS (NAR) showed a 9 percent jump in existing-home sales over the previous year.

For 2013, 84 percent of surveyed real estate professionals believe that real estate values and the number of transactions will increase this year over 2012. Whereas in 2012, one-third of real estate markets were forecasted to see valuation declines, no single market is expected to see a decline in valuations or transactions in 2013.

“The differences in how real estate professionals are seeing the market in the past 12 months is significant,” said Nikesh Parekh, CEO of ActiveRain. “Confidence in the real estate market has increased by 28 percent, and a rebound in both housing and construction this year is a great sign for the economy.”

Among the local markets expected to see the greatest activity and rebound in 2013 are several cities in the middle of the country. In fact, eight of top ten markets predicted to experience the most growth in 2013 are “heartland” states.

Market Leader, founded in 1999, provides innovative online technology and marketing solutions for real estate professionals across the United States and Canada. The company serves more than 125,000 real estate agents, brokerages and franchisors, offering complete end-to-end solutions that enable them to grow and manage their businesses. Market Leader customers earn more than twice the median income of the typical NAR member. Market Leader’s subscription-based real estate marketing software — including websites, contact management, a marketing center, and lead generation services — helps customers generate a steady stream of prospects, plus provides the systems and training they need to convert those prospects into clients. In addition, the company’s national consumer real estate sites, including http://www.realestate.com, give its customers access to millions of future home buyers and sellers, while providing consumers with free access to the information they seek.

ActiveRain is the real estate market’s largest social media network, with more than 330,000 professional members, and is owned by Market Leader.

The list of question every buyer asks about the various properties during a house hunt is relatively predictable.

How many bedrooms does it have? Baths? Square footage? What are the HOA dues? What’s the school district?

Then, we get more specific, personalizing the questions based on our own vision, aesthetics and lifestyle needs:

Can that wall be moved? Is there space for Grandma’s dining room table? Is there a shady spot for an orchid house in the backyard?

When it comes to crime, most of us simply don’t ask any questions at all, as (a) agents might be prohibited from doing much beyond pointing us to law enforcement sources, and (b) we tend to assume most neighborhoods are either ‘good’ or ‘bad,’ low-crime or not.

The truth is never so black and white. Fortunately, technology has made it easy-peasy for us to get a deeper, more nuanced, and more usable understanding of the crime that takes place in our neighborhood-to-be, which in turn allows us to make smarter decisions about which home we buy and how we live in it, once we buy it, than we could have even ten years ago.

The key to tapping into this nuanced crime information is asking the right questions. Here’s a short list of the right questions to ask about crime before you buy a home.

1. Do any offenders live nearby? In most states, Megan’s Law and similar provisions mandate that certain individuals with histories of criminal convictions must register their home addresses with local authorities, who in turn are required to make this information available to the public. Google “your city, your state Megan’s Law registry” to find sites where you can type in an address (like the address of the home you’re considering buying) and find a list of registered sex offenders in the area. Many of these sites will also offer you a map showing your address and the relative locations of the homes of the registered offenders.

The reality is that every neighborhood – even very upscale areas – has someone living in it who has committed a crime in the past, so don’t completely freak out if you happen to find someone in your neighborhood-to-be with a history of sex offenses. The utility of this information is that it empowers you and your children to recognize these dangers and to take care to avoid hazardous situations. That said, if you happen to have young children and notice that the Megan’s Law map has a halfway house with a dozen registered sex offenders living right next door to your target home, that information might change your decision about whether that property is the right one for you.

There is also power in following the path of the information you are given on these registry sites. Many will surface information like what the registrants’ crimes were, when they happened, the registrants’ photos and more useful intelligence. This information can help you evaluate the degree to which you should be concerned before you buy.

2. Was the home a drug lab? You think your home’s former owner’s food or pet smells are toxic? That’s nothing compared to the truly unpleasant and health-impairing effects some have experienced after buying a home that turned out to have been a methamphetamine lab in a former life. If the sellers know this about a home, they should certainly disclose it. Unfortunately, many of these homes end up sold by banks as foreclosures, or by estates, trusts, landlords or other corporate owners who don’t know the home’s past – or don’t have a legal obligation to disclose it.

Get the answer to this question to the best of your ability via this two-step process:
(a) talk with the neighbors – they often will reveal whether the house had a shady past, then
(b) search the federal Drug Enforcement Association’s Clandestine Laboratory Registry, here: http://www.justice.gov/dea/clan-lab/clan-lab.shtml.

3. What sorts of crimes happen in the area. Where and when do they happen? Crime happens virtually everywhere. But the details of crime patterns vary widely in various neighborhoods. One side of town might be plagued with an overall low crime rate, but the crime that does happen tends to be violent crime after dark. While another neighborhood across town might have lots of car break-ins during the day while people are at work, but not much going on after residents get back home – and not much violent crime at all.

This sort of information can be highly useful to a buyer-to-be, as it can help you make decisions not just about whether or not to buy, but also about whether to park your car outside (or not), whether to get an alarm and where in a given neighborhood you might prefer your home to be (e.g., interior cul-de-sac vs. thoroughfare in the same area).

Trulia Crime Maps offer precisely this sort of nuanced information, allowing you to view your town and neighborhood’s crime rate in heat map format showing the relative violent and non-violent crimes that have taken place recently in different parts of town. It also provides information on crime trends, in terms of the frequency of criminal activity taking place at various hours of the day, and the most dangerous intersections in your town or area. SpotCrime.com offers another angle on nuanced crime data, breaking down crime types with easy-to-scan icons and providing data for communities all over the country.

4. What anti-crime features does – or can – the home have? Review your disclosures and talk with the sellers (through your agent, of course) about what anti-crime features the home currently has. This will allow you to prepare for any upgrades, downgrades or changes you’ll want to make. For example, if a home has security bars that were installed 3 decades ago, you might want to have them brought up to code with a fire release bar, or removed altogether. Or, perhaps the sellers currently have the home wired for an alarm that can be armed, disarmed and video monitored remotely – if you want to continue that service, you’ll need to get that information and make the account change when you take over the other utilities and home services.

On the other hand, the home might not have any anti-crime features. So, if there is a particular alarm or monitoring system you like, it is smart to check in with that provider before close of escrow to find out whether they can provide services to the new address and, if so, what it will cost and take to equip the home and start service up at closing.

5. What does the neighborhood do to fight crime – and how can I help? Neighborhoods across the country fight and prevent crime the grassroots way, by maintaining strong connections between the home owners and neighbors who all have in common the desire to live and raise their families in a safe, secure, thriving place. Don’t hesitate to ask your home’s seller and/or any neighbors you talk to about whether there are any neighborhood associations, neighborhood watch groups, email lists, social networks, regular meetings, block parties or other community connections in which you can actively participate. ALL: Did you ever omit to ask a crime-related question about a home – and later come to regret it?

Do you have what it takes to beat competitors for the house you want?

The bidding wars are back. While not every local real-estate market is experiencing bidding wars, some homebuyers find themselves competing for houses because not many are for sale in their markets. For example, in Phoenix, it would take just 2.3 months to sell all the homes currently on the market, says Susan Paul, owner of Better Homes and Gardens Real Estate Move Time Realty in Scottsdale, Ariz. The result? Many homes have 10 to 15 offers the day they go on the market, she says.

To compete in a bidding war, buyers need to prepare financially for the home purchase. They have to be familiar with property values in their target neighborhoods. And they must know what they want.

While offering the most money might seem like the best way to win a bidding war, sellers don’t always choose the highest offer. Instead, sellers often prefer offers that are most likely to go through and that meet their conditions. Here are six tips to increase your chances of making the winning offer in a bidding war for the house of your dreams.

1. Have a lender on speed dial
“Too many buyers talk to a lender and start looking at homes at the same time,” says Eldad Moraru, a real-estate agent with Long & Foster Real Estate Inc. in Bethesda, Md. “You need to have everything (financial) done before you begin to look.” Then you are more likely to win a bidding war.

He suggests selecting a lender and a loan, completing everything the lender requires and having a preapproval letter in hand — all before submitting an offer.

“You need to make sure your lender is ready to issue an approval letter specific to the property at the drop of a dime,” Moraru says.

Paul recommends keeping a file folder constantly updated with your most recent pay stubs, all pages —even blank pages — of recent bank statements and any other documentation the lender may need to make a quick loan approval. Then you are ready to make an offer.

A strong preapproval is essential, especially if you are competing against buyers with cash to offer, says Alan T. Aoyama, vice president of Century 21 M&M Associates in Cupertino, Calif. Any hint that you might have trouble qualifying for financing could eliminate you from the seller’s choice of buyers.

2. Cash in your pocket plus the paperwork to prove it
“An all-cash buyer can even waive the appraisal,” Aoyama says. “If you’re a noncash buyer, you need to have a copy of your proof of funds with your offer, along with a strong preapproval. At a minimum, you should offer a down payment of 20% if you know you’ll be competing against other buyers. You need to show you have the funds to close and the ability to make up the difference if the appraisal comes in too low.”

Moraru says that in Washington, D.C., and Maryland, it’s common to supplement your offer with a financial information sheet detailing your job history, salary and bonuses, 401(k) balance, how much you have for a down payment and where the money is saved.

A higher-than-customary earnest money deposit can sometimes impress sellers when there is a bidding war, Moraru says. Just make sure you fully meet all deadlines and terms of the contract so you don’t lose your deposit.

3. Make a fast, personalized offer
To compete against other buyers in a potential bidding war, make sure you see a home the day it goes on the market, so you can move quickly, Paul says.

“Your buyers agent should talk to the listing agent to find out what is motivating the sellers and what they need — such as a quick settlement or a post-settlement rent-back,” Paul says. “Be flexible, and work that into your offer. Make it as easy on the sellers as possible so your offer is chosen above 15 others.”

Paul says buyers should offer to help the sellers in any way they can, such as helping them find a home for their pet if they can’t take it with them.

Moraru says while price is important, sellers want to know the buyer can finance the property and meet any other conditions. If you don’t know the date when the sellers want to settle, you can write “will settle on seller’s schedule” into the offer.

Aoyama suggests offering 30 days of free rent if the sellers want to stay in their home after settlement.

4. Keep your home inspector on alert
Most real-estate agents don’t recommend buying a home without an inspection, but making your offer contingent on an inspection can weaken your position if other buyers are waiving an inspection contingency. Aoyama says buyers should carefully read all disclosures and reports that are available, because some sellers provide a home inspector’s report for buyers. You can also have an home inspection done after your offer has been accepted that can provide information on the home’s condition.

“If you’re serious about a particular house, you can have a home inspection before you make an offer, and then make a noncontingent offer if you’re satisfied with the report,” Moraru says. “You’ll need to move fast, though, and have a home inspector ready almost the day the home goes on the market.”

Paul says you can bring a home inspector along when you first look at the home and say the inspector is a friend, just to get a feel for the condition of the home without an in-depth checkup.

“If the inspector says the house looks OK, you can feel better about waiving the home inspection contingency,” Paul says.

5. Eliminate or reduce contingencies
One of the best ways to make your offer stronger is to eliminate contingencies regarding home inspection, financing or appraisal, Aoyama says. That puts you in a more solid position to win a bidding war. If you have cash reserves to cover the gap between a low appraisal and your offer, you can waive the appraisal contingency, he says, but leave your financing contingency in place to protect yourself.

“If you can’t waive these, you can at least shorten the time frame, such as (by) reducing the loan contingency to 10 days if you know your lender can provide you with proof of financing quickly enough,” Aoyama says.

Offering to buy the home as is can be tempting, but make sure you have an accurate idea of the home’s condition with an informational inspection for safety.

Paul says buyers need to make their offer as strong as possible, so if you don’t need a home warranty or help with closing costs, don’t ask for them.

6. Try an escalation clause — maybe
An escalation clause is an addendum to a purchase offer that authorizes your agent to offer a specified amount above the best offer the seller receives. It’s a powerful way to wage a bidding war. “Buyers are offering escalation clauses a lot less often than when the housing market was booming, unless the home is priced way below market value,” Moraru says. “I recommend that buyers who want to offer an escalation clause be very careful when choosing to go as high as they can with the understanding that they can live with the price if it goes to the maximum amount. They also need to feel that if someone else gets the house at a higher price, that buyer overpaid.”

Real estate brokerage company Zip Realty($3.51 0.01%) announced its latest home price report Tuesday, revealing an 11% increase in the U.S. median home sales prices year-over-year.

The median home sales price hit $211,312, up from $190,000, the median price in 2011.

The National Association of Realtors also released its existing home sales report this week, which showed an average increase of 6.3% nationwide. However, for the 33 markets that ZipRealty and their partners serve, the average home sales price increased even more.

Phoenix and South Florida reported the highest gains, with Phoenix prices up 20% from $112,329 to $145,000 and Miami prices jumping 23% from $126,000 to $155,000.

Chicago was the only market that dipped, dropping 3% from $165,000 to $160,000 at the year’s end.

“The metros that suffered the most during the real estate downturn – South Florida and Phoenix – have exhibited the greatest improvement recently,” according to Jamie Wilson, senior vice president of technology at ZipRealty

These metros, which were characterized by a high volume of housing market distress in the form of foreclosures, are now seeing that trend reverse itself with greater volumes of regular re-sale activity even in many of the hardest hit markets.

“We expect to see housing values appreciate steadily, albeit gradually, with the strongest growth in coastal markets like San Francisco and parts of Florida,” noted Lanny Baker, chief executive officer and president of ZipRealty. “Home sellers who have delayed putting their home up for sale in recent years may consider whether 2013 is finally the year to take advantage of improving macroeconomic conditions and a healthier real estate market.”

By Ilyce Glink | CBS MoneyWatchAmericans are on the move. According to the U.S. Census Bureau, more than 36 million people relocated in 2012, an increase from 2011’s record low mover rate of 35.1 million. And while many of those stayed within the same county, plenty of them packed their bags and moved to a different state.Data from Penske Truck Rental, a global transportation services provider, showed that warmer climates were the biggest impetus to move last year. Check out where Americans moved in 2012.

10. Sarasota, Fla.Located on Florida’s Gulf Coast, Sarasota is home to Siesta Key Beach, which ranked one of the top three beaches in the U.S. for four years in a row. In addition to its fine white sand and calm blue waters, Sarasota is the perfect place to enjoy boat rides, eco-tours, world-class restaurants and more. With a median home sale price of $165,000, according to online real estate firm Trulia.com, housing is affordable for many middle-income families.

9. Charlotte, N.C.Charlotte is a major U.S. financial center, with Bank of America and the East Coast operations of Wells Fargo both headquartered here. In 2011, the city was named the second largest financial center by assets, behind New York City. Nicknamed “The Queen City,” Charlotte is home to the NASCAR Hall of Fame, more than 40 public golf courses and plenty of other big-city attractions. On average, homes sell for around $162,000.

8. SeattleIt’s certainly not warm and sunny, but Seattle offers residents a little bit of everything. Check out the city’s gorgeous mountain and water views from the famous Space Needle, or enjoy the generally mild temperatures and locally grown food at Pike Place Market. Homes sell for a median price of $362,500; if you have more to spend, check out the unique houseboats — a la “Sleepless in Seattle” — on Lake Union. They’re more expensive than a traditional home but offer a one-of-a-kind living experience.

7. DenverDenver is the perfect blend of big city and mountain living. A short drive from the Rocky Mountains, the “mile high” city draws residents who want to work hard and play harder — outside. From skiing and snowboarding in the winter to mountain biking and hiking in the summer, there’s always something to do. The weather is generally mild, with super-hot and below-freezing days peppered in for good measure. For all its perks, Denver’s home prices are reasonable — the median home sale price is $233,950.

6. HoustonWinters in Houston are mild, to say the least. Temperatures average in the mid-60’s December through February, and are well into the 70s by the time March rolls around. If you like mild winters, hot summers and Southern hospitality, Houston is the place for you. There are plenty of employment opportunities, and homes sell for a median price of $124,050. For that price, you’ll have plenty of cash left over to enjoy the countless restaurants and shops Houston has to offer.

5. ChicagoResidents of the Second City enjoy food from all over the world, thanks to Chicago’s diverse neighborhoods, and entertainment that ranges from the world-famous Joffrey Ballet to local rock bands. Public transit moves residents easily from neighborhood to neighborhood, so a car is unnecessary, and the median home sale price is $190,000 — a steal for a home in a large city.

4. Orlando, Fla.
It’s well-known as the home to Disney World, but Orlando isn’t just Mickey Mouse. It’s also one of the world’s largest golf destinations and home to more pro golfers than any other city in the world. But you don’t have to hit the links to enjoy the city. Locals relish fishing, boating and other outdoor activities in the year-round warm weather. Homes are inexpensive, with the median home sale price hovering around $116,000.

3. Phoenix
If you love warm, sunny weather, Phoenix is for you. The average temperature is 70 degrees in February, and rainfall is a rarity year-round. While summer days can peak well into the 100s, evenings are great for dining under the desert stars. Residents enjoy kayaking, hiking and biking in the spring and winter months, before the heat of summer gets too oppressive. The Phoenix real estate market is slowly rebounding from its post-housing bust lows, but the median home sale price is still a reasonable $131,000.

2. Dallas-Fort Worth
Reasonable housing prices, ample job opportunities and pleasant weather continue to draw new residents to the Dallas-Fort Worth area. Enjoy the classic, Texas-style fun, like rodeos, along with fast-paced thrills at the Texas Motor Speedway and Six Flags Over Texas amusement park. Even with all the nightlife, shopping and entertainment that residents enjoy, home prices remain reasonable — the median home sale price is $61,000.

1. Atlanta
For the third year in a row, Atlanta was the country’s most popular place to move last year. A diverse city with many cultural attractions, residents enjoy the perks of big cities like New York and Chicago without the sub-freezing temperatures. Atlanta is home to the world’s largest aquarium, numerous critically acclaimed restaurants and a thriving cultural scene. For a city as in-demand as Atlanta, homes are affordable, with a median home sale price of $200,100.

Fed missed the housing bust

(MoneyWatch) Who would want a detailed, public record of our business decisions? Unfortunately, if you are an esteemed Fed governor, you must confront your exact words from meetings that occurred 5 years ago. The central bank released 1,566 pages of transcripts from each of the Fed’s eight monetary policy meetings in 2007, which is customary. What is not customary, of course, is that 2007 was the year that one would have hoped that our most esteemed bankers would have gotten the drift that there was something rotten in the nation’s housing market.

Clearly Chairman Ben Bernanke would like to take back this January 2007 comment: “The housing market has looked a bit more solid, and the worst outcomes have been made less likely.” Or his June remarks, which may have been a “bit” of an understatement: “A bit of cooling in the financial markets might not be an entirely bad thing.” Bernanke is not alone in his misjudgment of the economic and financial industry landscape. Outgoing Treasury Secretary Tim Geithner, who in 2007 was the NY Fed president, said “Direct exposure of the counterparties to Bear Stearns is very, very small compared with other things.” Oops!

There was one Fed governor who nailed the situation. Janet Yellen, who at the time served as the San Francisco Fed president, expressed the danger that loomed in June 2007: “I still feel the presence of a 600-pound gorilla in the room, and that is the housing sector. The risk for further significant deterioration in the housing market, with house prices falling and mortgage delinquencies rising further, causes me appreciable angst.”

Yellen’s prescience is reminiscent of Brooksley Born, the late 1990s chairman of the Commodity Futures Trading Commission, who was the only regulator who saw the danger of over-the-counter derivatives, the vehicles that a decade later would contribute to the financial crisis. The big difference in 2007 was that Yellen was not the lone voice and she was not bullied by her colleagues.

Still, Yellen could not rally the other central bankers to her cause. In September 2007, she reiterated her concerns: “A big worry is that a significant drop in house prices might occur in the context of job losses, and this could lead to a vicious spiral of foreclosures, further weakness in housing markets, and further reductions in consumer spending. … at this point I am concerned that the potential effects of the developing credit crunch could be substantial.” Yellen is currently the Vice Chair of the Board of Governors of the Federal Reserve System and if she was seen as a potential successor to Ben Bernanke prior to this release, these comments beef up her chances in a big way.

Eventually, the Fed did recognize the magnitude of the problem, but as is often the case, the governors were late in their diagnosis and remedies. That’s why so many economists are worried about the central bank’s ability to withdraw its easy monetary policy when the U.S. economy improves. With the current low level of inflation (running below the Fed’s target of 2 percent on a year-over-year basis) and the high level of unemployment, the Fed will keep buying bonds and pushing money into the system until further notice. But will the Fed be able to predict when its time to stop?

Right now, economic growth is stuck in a low gear of about 2 percent annually, but when it reaccelerates, perhaps due to an uptick in global growth or a housing sector that perks up, the Fed could once again be behind the curve. When that happens, inflation will re-emerge; bonds will finally see the much-predicted sell-off; and the Fed will likely cringe when future transcripts are released.

This week, evidence of housing’s recovery will continue to trickle in. There’s little doubt that 2012 was the year that housing bottomed nationally. Prices were up about 6 percent; existing and new home sales rose by about 15 percent each; and housing starts increased 28.1 percent.

While this is good news, the housing crash created quite a hole. Prices are still down about 30 percent from the peak and even with the big jump in starts, 2012 ranks as the fourth lowest year since the Census Bureau started tracking starts in 1959 (the three lowest years were 2009 through 2011).

At Lambert Ranch, an Irvine, California, housing development where prices start at $1 million, just two of 98 homes are unsold since the project opened in May.

The builder, New Home Co., is opening 14 neighborhoods in California this year for buyers who want to seize on low interest rates amid a scarce supply of homes for sale.

“Everywhere we are, we can see it,” Larry Webb, chief executive officer of Aliso Viejo, California-based New Home, said in a telephone interview. “Talk about pent-up demand.”

U.S. home sales and prices are poised to rise in 2013, solidifying a recovery that began last year after a half-decade slump that was the deepest since the Great Depression, according to analysts and economists surveyed by Bloomberg. Record-low mortgage rates and attractive prices, supported by declining unemployment, are luring buyers as the inventory of distressed homes shrinks. Homebuilders are responding by adding supply, bolstering economic growth.

“Increased new residential construction activity will lead to employment gains, which should translate into higher consumption and modest GDP growth,” Robert Wetenhall, a homebuilding analyst with RBC Capital Markets LLC in New York, said in a telephone interview. The U.S. budget deal reached this week removes a cloud to that outlook, he said.

Sales Gains

Sales of existing homes will rise about 7.2 percent in 2013 to 4.98 million, the highest since 2007, based on the median estimates of 15 economists and housing analysts surveyed by Bloomberg News for this story. Prices will gain 3.3 percent after an estimated 4.5 percent jump in 2012, according to the forecasters, who used varying measures of values.

Building is set to jump after the inventory of new homes fell last year to the lowest level in half a century. Housing starts, including single- and multifamily units, are expected to increase 24 percent to 967,000 in 2013, the most since 2007, according to the median of 17 estimates. Starts will reach an annual pace of 1 million by the end of this year and 1.5 million by the end of 2016, according to a report today by Goldman Sachs Group Inc. analysts led by Hui Shan, who said housing will remain a “bright spot” in 2013.

Purchases of new single-family houses will climb 23 percent to 448,000 this year, extending last year’s rebound from a record low 306,000 in 2011, according to estimates of 17 analysts surveyed for this story.

“We expect housing to continue this momentum into 2013 and in fact show stronger growth rates due to pent-up demand,” Mark Kiesel, managing director at Pacific Investment Management Co. in Newport Beach, California, wrote in an e-mail.

Buying Home

Kiesel, who predicted the home-price bubble would burst in 2006, is betting on an extended housing recovery with his investors’ money and his own. In May, six years after selling his last house near the real estate peak, Kiesel bought a Newport Beach home in a sign of his conviction that prices had bottomed. The Pimco Investment Grade Corporate Bond fund outperformed (PIGIX) the broader Barclays US Credit index in 2012 because of its housing-related investments, he said.

“Residential investments potentially could grow between 20 percent and 30 percent” in 2013, adding as much as 0.75 percent to U.S. gross domestic product growth, he said.

The U.S. economy expanded at an annual pace of 3.1 percent in the third quarter, the Commerce Department said Dec. 20. Residential fixed investment climbed almost 14 percent from a year earlier to $370.9 billion, its highest level since the end of 2008. Gross domestic product will increase 2 percent this year, based on the median of 85 estimates in a Bloomberg survey.

Jobs Growth

U.S. payrolls rose by 155,000 workers last month following a revised 161,000 advance in November that was more than initially estimated, Labor Department figures showed today. The unemployment rate matched a four-year low, at 7.8 percent.

While new-home sales are at about a third of the level they were at the peak in 2005, builders are growing more bullish. The National Association of Home Builders/Wells Fargo Housing market index last month rose to its highest level since April 2006. The gauge, in which a number above 50 indicates more builders view sales conditions as good than poor, reached 47, compared with a low of 8 in January 2009.

The Standard & Poor’s Supercomposite Homebuilding Index (S15HOME) jumped 84 percent last year, the best performance since 2003. PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, surged 188 percent for the biggest gain in the entire S&P 500. (SPX)

‘Virtuous Circle’

Increases in home prices, construction employment and consumer optimism can restart the “virtuous circle,” shifting housing from an economic drag to an economic engine, according to Michael Widner, an analyst with Stifel Nicolaus & Co.

“We see 2013 as the year the housing story progresses from ‘no way’ to consensus, and the GDP and job growth tailwinds being sustainable through 2015,” Widner, based in Baltimore, wrote in a Dec. 19 note.

Homebuilders have added another 2.8 percent in the last two days after the government’s budget deal. The agreement keeps homeownership tax benefits, such as the deductibility of mortgage insurance premiums and limits on capital gains taxes, which may help boost home sales, said Michael Rehaut, a homebuilding analyst with JPMorgan Chase & Co. in New York.

“Not only do we view it as a positive that these favorable provisions remain in place, but additionally, this result continues to support our view that the emerging housing recovery remains a top economic priority for the White House, Congress and the Fed,” Rehaut wrote in a Jan. 2 note.

Uncertain Outlook

Not everyone is convinced the worst is over. Robert Shiller, co-creator of the Case-Shiller index, said the outlook for home prices is “highly uncertain” because more people are becoming renters rather than buyers. The number of U.S. occupied residences increased by a net 1.15 million in the 12 months through Sept. 30, with a gain of 1.32 million rentals and a drop of 175,000 owner-occupied homes, according to the Commerce Department.

“We’ve seen a decline in general interest in home ownership,” Shiller, a professor of economics at Yale University in New Haven, Connecticut, said Dec. 27 on Bloomberg Television. “We’re seeing rentals rise. Our permit data show that new construction has tilted toward multifamily.”

Based on home sales, construction starts and mortgage delinquencies, the housing market is “halfway back to normal,” said Jed Kolko, chief economist of Trulia Inc., a San Francisco- based real estate website operator.

Houston, Chicago

“It’s likely that it will be another three years or so — maybe the end of 2015 or the start of 2016 — before we see that market nationally back to normal,” Kolko said in a Dec. 26 interview on Bloomberg Television. “Some local markets, like Houston and the San Francisco Bay area, are actually close to where the normal areas are. Whereas others, like Chicago and Atlanta, are a long, long way from normal.”

Home prices rose 4.3 percent in October from a year earlier, the biggest year-over-year price gain since May 2010, according to the S&P/Case-Shiller index of 20 cities. The gauge is up almost 9 percent since hitting a 10-year low in March. It fell as much as 35 percent from a July 2006 peak.

Competition among buyers seeking to take advantage of low prices and record-low interest rates propelled the price gains, Kolko said. The rate for a 30-year fixed loan tumbled to an all- time low of 3.31 percent in November, according to Freddie Mac. The number of homes listed for sale that month fell to the fewest since December 2001, data from the National Association of Realtors show.

Underwater Homeowners

“Price increases will spur more new construction, which will add to inventory,” Kolko said in an e-mail. “And price increases will lift some underwater borrowers back above water, encouraging some of them to sell,” he said, referring to homeowners who owe more than their property is worth.

More homeowners who awaited higher prices are preparing to list their houses this year by painting, laying carpets and sprucing up kitchens and bathrooms, said Alan Smith, a broker with Re/Max Professionals in Littleton, Colorado.

“There’s a lot of updating going on so they’re ready to go to market,” Smith said in a telephone interview from his office in the Denver (SPCSDEN) area, where prices climbed 6.9 percent in the 12 months through October. “A lot of folks’ homes are tired and they haven’t had the money or the time to update them.”

The estimated 11 million underwater homeowners have created a “paradox of negative equity,” according to Sam Khater, senior economist for CoreLogic Inc., an Irvine, California-based real estate data service. Because they can’t sell without taking a loss, these homeowners have helped drive up prices by limiting inventory listed for sale, he said.

Distressed Sales

Distressed home deals already account for a smaller share of transactions. In November, 22 percent of resales were foreclosures or short sales, when the lender agrees to sell for a loss. That was down from 29 percent a year earlier, according to the Realtors group.

The decrease is helping to boost home-price indexes and creating a false sense of a healthier market, said Michael Feder, CEO of Radar Logic Inc., a New York-based property price research company.

“We are not in a real housing recovery yet,” he said in an e-mail. “Current signs of improvement could evaporate quickly.”

Blackstone Buying

Distressed-home inventory has been drying up as investors purchase foreclosed properties and other low-cost homes. Blackstone Group LP, the world’s largest private-equity firm, has been buying as much as $100 million of homes a week to manage as rentals or sell when prices rise.

“We think there’s a lot more home price appreciation to go,” Blackstone President Tony James said at a Dec. 5 conference in New York sponsored by Goldman Sachs Group Inc.

Homes that were seriously delinquent, in the foreclosure process and not yet listed for sale, known as the shadow inventory, shrank 12 percent in the 12 months through October to 2.3 million units, CoreLogic reported Jan. 2.

“Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply,” Mark Fleming, CoreLogic’s chief economist, said in a statement. “Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013.”

Buyer Traffic

Builders such as New Home’s Webb are seeing a lot of interest from prospective buyers. More than 6,500 people visited Lambert Ranch’s model homes on opening weekend in May, and high traffic continues from homeseekers with resources to buy, Webb said.

Shoppers will soon have more options. In Orange County, California, where New Home Co. is based, two dozen subdivisions are opening this year, the most since 2006, Webb said.

Webb, a homebuilder for 25 years, co-founded the New Home Co. in 2009 after his previous company, John Laing Homes, went through bankruptcy liquidation. Just three years earlier, as the housing prices were about to crash, John Laing was sold for $1.05 billion to Emaar Properties PJSC (EMAAR), a Dubai-based developer.

“We’re not looking for some crazy boom,” Webb said. “We’d just like to see consistent sales and modest price appreciation.”

Housing is considered a bright spot in the U.S. economy. But the fiscal cliff – over $600 billion in tax and spending provisions set to expire at the end of the year – could deliver a blow the housing recovery.

Bank of America’s Michelle Meyer writes that the hosing market is exposed to the cliff in two ways.

First, policies that impact growth and that could potentially send the economy in to a recession or create uncertainty could weigh on housing demand and construction.

Second, policymakers also need to hash out how they intend to support the housing and mortgage market.

“Tax policies for housing and the government’s role in the mortgage market are up for debate. The biggest concern is removing or reducing the mortgage interest tax exemption, which costs the Treasury about $80bn a year. Homeowners with a mortgage can deduct interest payments from household income if they chose to itemize allowable expenses. If homeowners do not itemize, they can take the “standard” deduction, which is up to $11,900 for couples and $5,950 for singles. About two-thirds of the population takes the standard deduction.

Those who chose to itemize have large mortgage payments and/or other deductions such as charitable contributions; this mostly captures the upper income cohort. Of those who itemize deductions, 90% earn more than the median income.1 This means that if the mortgage tax deduction was removed or phased out it would hit the higher priced markets disproportionately. Home prices would have to adjust lower as effective mortgage payments would be higher.”

Meyer doesn’t anticipate any changes immediately but expects them to be part of the ‘grand bargain’. She thinks the high-priced housing market would be most affected.

She projects that home prices will increase 3 percent in 2013, and that housing starts will increase 25 percent to an average of 975,000.

Mortgage rates are anticipated to remain at an all-time low for the first half of 2013, then slowly rise during the second half of the year, although they will remain below 4%, reported Freddie Mac.

On the same day that Fannie Mae released its National Housing Survey, showing increased consumer confidence in the housing industry, Freddie Mac revealed its U.S. Economic and Housing Market Outlook for December.

The housing outlook predicts what some of the market features are expected to look like in 2013.

“The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive,” said Frank Nothaft, vice president and chief economist of Freddie Mac.

Property values are expected to gain strength with most house price indexes increasing as much as 3% next year.

Housing starts are expected to jump to a net 1.20 to 1.25 million household increase in 2013, with starts up around the 1 million annualized pace by the fourth quarter.

Vacancy rates should fall significantly for both apartments and single-family homes for sale, dropping to 2002 to 2003 levels.

The 2012 refinance boom will continue into early 2013, suggesting single-family mortgage originations may decline by as much as 15%, while multifamily lending is believed to rise approximately 5%.

“This has been a big change from a year ago, when some analysts worried that the looming ‘shadow inventory’ would keep the housing sector mired in an economic depression. Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery,” said Nothaft.